Shares of Coronation Fund Managers slumped the most in about five-and-a-half months, after the firm became the latest asset manager to report lacklustre results due to the turmoil in financial markets in 2022.
The Cape Town-headquartered firm’s share price fell as much as 4.9% to R32.40, the lowest level in more than two weeks and the steepest intraday drop since June 8. The share pared losses later to close at R32.76.
The share price drop came after Coronation said headline earnings per share (Heps), a profit measure that excludes one-off items, fell 25% to 366.3c a share for the year to end-September, down from 487.9c in the previous corresponding period. The group’s revenue fell 12% to R3.74bn, down from R4.26bn the prior financial year.
Even so, Coronation still managed to declare a final gross dividend of 172c a share, though that was down sharply from the 226c declared in the previous financial year. Net of dividend tax the final dividend amount was 137.6c a share for shareholders not exempt from dividend tax.
“Our financial results for the period under review reflect the sharp declines seen across all asset classes globally,” CEO Anton Pillay said. “Fund management companies are cyclical businesses that are heavily impacted by market movements.”
Coronation’s full-year results mirror a similar experience of larger rival Ninety One, which last week reported half-year results showing a sharp drop in earnings and a decline in assets under management (AUM) due to 2022’s market volatility. Financial markets worldwide have been roiled in 2022 due to a combination of the war in Ukraine, rampant global inflation and lingering supply chain disruptions in the wake of the Covid-19 pandemic.
The MSCI world index, a measure of global equity performance, has dropped about 18.3% as the Ukraine crisis, rising living costs and aggressive central bank rate hikes across the world curbed investor appetite for higher-yielding assets. By contrast, the JSE all share index is down just 2.6% so far in 2022, though at end-September its year-to-date performance was -13.5%.
Pillay said the “challenging market environment” resulted in net outflows that equated to 5.7% of Coronation’s average AUM of R621bn for the period. That works out to about R35.4bn over the course of the financial year.
Coronation’s closing AUM fell 9% to R574bn in the period under review, down from R634bn a year before. Nevertheless, the asset manager said its closing AUM by November 15 had recovered to R610bn, reflecting the extreme volatility in financial markets.
“This is in line with our expectations and it reflects the realities of a shrinking domestic savings pool,” said Pillay. “As a large domestic manager, we expect Coronation’s flows to broadly reflect that of the SA savings pool and the economic reality within which it operates.”
The most recent statistics from the Association for Savings and Investment SA (Asisa) show that total assets held by the country’s collective investment scheme (CIS), or unit trust sector, declined from R3.14-trillion at end-December 2021 to R2.98-trillion at end-June. When the data was released in late September the association put the decline down to a combination of financial market volatility, the lingering effects of the Covid-19 pandemic and the rising cost of living.
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